September 2013: Economic Sentiment rises further in both the euro area and the EU

In September the Economic Sentiment Indicator (ESI) increased by 1.6 points in the euro area (to 96.9) and 2.4 points in the EU (to 100.6). The sharp increase in the EU brought the indicator above its long-term average for the first time since July 2011.

Economic sentiment indicator (s.a.)

September EU: 100.6 - Euro Area: 96.9

Euro area developments

In the euro area, the strong increase resulted from markedly improved confidence across all business sectors, whereby improvements in construction and retail trade were particularly pronounced. Economic sentiment improved in three of the five largest euro area economies, namely in Spain (+2.5), Italy (+2.5) and France (+1.6). Sentiment in Germany remained broadly unchanged (+0.3), while it worsened somewhat in the Netherlands (-0.9).

Industry confidence increased (+1.1) driven by managers' much more positive assessment of production expectations and, less pronounced, the current level of overall order books and the stocks of finished products. Among the questions not included in the calculation of the confidence indicator, the assessment of the current level of export order books followed the positive trend, while past production stands out with a worsened assessment. Services confidence booked increases as well (+1.9), resulting from managers' sharply improving appraisals of demand expectations, the past business situation and, to a lesser extent, past demand. Consumer confidence continued the upward trend persisting since December 2012. The improvement (+0.7) was thanks to more optimistic views on the future general economic situation, unemployment expectations and the future financial situation of households, which more than outweighed consumers' increased pessimism about their savings over the next 12 months. Retail trade confidence increased substantially (+3.6). Managers were particularly more positive about the present business situation. Also their assessments of the future business situation and the volume of stocks improved. The construction sector registered the sharpest confidence increase of all surveyed sectors (+4.4), with managers' brightening appraisal of order books and their improved employment expectations contributing to the same degree. Financial services confidence (not included in the ESI) increased sharply by 6.1 points, driven by a striking increase in managers' demand expectations, as well as improving assessments of past demand and the past business situation.

Employment plans were revised upwards in industry, services, retail trade and construction. Selling price expectations remained broadly stable in industry and retail trade, while increasing in construction and decreasing in services. Consumers' price expectations for the next 12 months decreased as well.

EU developments

In the wider EU, the improvement in sentiment was even more pronounced than in the euro area (+2.4). On a sector basis, the increases in industry, services and among consumers were stronger than in the euro area, while comparatively less pronounced in retail trade and construction. On a country basis, the main reason for the sharper increase was markedly improving confidence in the largest non-euro area EU economy, the UK (+6.9). The EU financial services confidence indicator improved at a slightly lower pace than in the euro area (+5.5).

EU employment plans were broadly in line with the euro area, except for retail trade, where plans were revised downwards and construction, where the upward revision was smaller. Also selling price expectations were in line with the euro area figures, except for retail trade, which saw price expectations rising rather than remaining stable.

Industrial confidence indicator (s.a.)

September EU: -5.2 - Euro Area: -6.7

Service confidence indicator (s.a.)

September EU: 1.1 - Euro Area: -3.3

Consumer confidence indicator (s.a.)

September EU: -11.7 - Euro Area: -14.9

Retail trade confidence indicator (s.a.)

September EU: -0.4 - Euro Area: -7.0

Construction confidence indicator (s.a.)

September EU: -27.3 - Euro Area: -28.8

Financial services confidence indicator (n.s.a.)

September EU: 14.2 - Euro Area: 11.3

The next Business and Consumer Survey is due to be published on 30 October 2013.